Title Insurance

Buyers and lenders through separate policies against financial loss that might be incurred because of title defects discovered after closing

To provide clear, marketable title to properties conveyed. Title insurance protects sellers by enabling them to do so.

Offers protection of as much as the mortgage loan balance

Any liens recorded after the effective date of the title policy, taxes, special assessments, any claims not shown in public records, and claims against a title by anyone who lives or lived on the property unless there’s a recorded record of tenancy

The title company will either pay the debt or take the claimant to court. If the title company pays the claim, it may seek reimbursement from the at fault party

When a covered party such as the property owner or the lender gives the title insurance company the right to pursue the party who causes the loss instead of the covered party

Performs a search of public records in an attempt to discover any potential claims against the property and issues a preliminary report also called a title commitment that’s a promise to insure the property as long as certain conditions are met

A summary of the property’s title history. Attorneys and title companies who prepare abstracts research public records as well as other information to identify the title history.

Establishes the path of property ownership from its first owner to the current owner. The chain begins with the current owner and works backwards

The grantor-grantee index establishes chain of title. When the last grantee is not the next grantor, a gap exists in the chain. Gaps must be resolved, sometimes by branching out from public records, in order for clear title to be given

Marketable title and insurable title

Good, clear, or merchantable title. Has no defects or clouds. It’s not necessarily a perfect title. Sellers can convey marketable title of the title search reveals no doubt about property ownership and there aren’t any liens or encumbrances that won’t be cleared at closing

One against which there may be known defects such as easements but the title company has notified the parties of the defect and has agreed to insure against it not lost it as a policy exception

One against which there may be known defects such as easements but the title company has notified the parties of the defect and has agreed to insure against it not lost it as a policy exception. A key concern is that sellers who offer insurable title instead of marketable title may not have to clear up title problems that come up before closing

The safest decision for buyers is to receive marketable title that’s backed by a title insurance policy

Is any encumbrances, such as a lien or inheritance claim, that prevents the seller from providing clear, marketable title

Sellers existing mortgage lien, mechanics liens, property tax liens, lack of sole ownership

Sellers existing mortgage lien, mechanics liens, property tax liens, lack of sole ownership, unrecorded liens, unrecorded deeds, unknown heirs to property conveyed upon or after the owners death

Title officially changes hands when the grantor delivers the deed to the grantee and the grantee accepts it

Title officially changes hands when the grantor delivers the deed to the grantee and the grantee accepts it

A written and signed legal instrument of conveyance. The deed is the document that legally transfers title to real property from the owner (grantor) to the new owner (grantee). Title officially changed hands when the grantor delivers the deed to the grantee and the grantee accepts it

General warranty, special warranty, and quitclaim deeds

General warranty, special warranty, and quitclaim deeds

Offers the greatest warranty to buyers and is the preferred type of deed in most situations

By statue, some states have combined the covenant of seisin and the covenant of the right to convey, in those states, only five covenants exist

Covenant of seisin

Covenant of right to convey

Covenant against encumbrances

Covenant of seisin

Covenant of right to convey

Covenant against encumbrances

The grantor holds

Covenant of seisin

Covenant of right to convey

Covenant against encumbrances

The grantor holds title to and possession of the property

Covenant of seisin

Covenant of right to convey

Covenant against encumbrances

The grantor holds title to and possession of the property

The grantor has the right to convey both title to and possession of the property

The grantor assures the grantee that there are no encumbrances against the title other than those identified in public records or the deed itself

Covenant of quiet enjoyment

Covenant of further assurances

Covenant of warranty or warranty forever

Covenant of quiet enjoyment

Covenant of further assurances

Covenant of warranty or warranty forever

The grantor assures that the grantees use and enjoyment of the property will be unimpaired and unrestricted, subject to public police powers and private deed restrictions

Covenant of quiet enjoyment

Covenant of further assurances

Covenant of warranty or warranty forever

The grantor assures that the grantees use and enjoyment of the property will be unimpaired and unrestricted, subject to public police powers and private deed restrictions

The grantor promises to take whatever actions necessary within his power to correct any title defects

In this most important covenant, the grantor promises to protect and defend the title against lawful claims made by others

Warrants only against title defects acquired during the grantors ownership of the property. It guarantees that the grantor owns and may convey the property and warranties that the property is free of any debts or encumbrances not noted in the deed. A special warranty deed is most often used in conveying commercial properties

Most often used in tax or foreclosure sales.

Only releases any of the grantors property rights to the grantee. The quitclaim deed is typically used to clear up a simple cloud on title

Such as the executors deed to convey property from a decedents estate

Used to convey foreclosed property or property sold for tax liens

Conveys real estate to a trustee for the beneficiary named in the trust agreement. The deed is conveyed to a trustee who holds it until the mortgage loan is paid in full or until the borrower defaults and the lender must foreclose

The deed includes this clause which defines the type of interest and rights the grantee will have.

Ensures that the buyers ownership (title) is protected. It provides constructive notice of the sale/purchase, which means that the record is publicly available to anyone who does a records search. This is in contrast to actual notice which means that the parties have personal knowledge of a particular event

A broker, closing agent, title representative, escrow officer, or attorney, though the most common is likely to be a title company representative

Properly manage any escrow funds, including distributing escrow funds based on instructions from the parties or the court in case of a dispute. Manage transaction documents and instructions from the parties, perform or delegate the performance of the title search, work with lenders and other necessary third parties to get the required information, manage contract instructions, broker commissions, and title policy, prepare closing documents and conduct the closing meeting, record required documents, verify funding of buyers loan and arrange payoff of sellers loan, distribute funds, and file 1099-S form as necessary

Shared expenses that either party owes at closing are prorated (divided between) the parties depending on when closing occurs.

Shared expenses that either party owes at closing are prorated (divided between) the parties depending on when closing occurs.

Property taxes and HOA dues

Fuel (Propane or Oil Tank)

Water and Sewer Charges

Shared expenses that either party owes at closing are prorated (divided between) the parties depending on when closing occurs.

Property taxes and HOA dues

Fuel (Propane or Oil Tank)

Water and Sewer Charges

Accrued or Prepaid

Items the seller owes on closing day but that will eventually be paid by the buyer such as unpaid property taxes and appear in the sellers debit column and the buyers credit column

Those already paid by the seller but that the buyer should pay a portion of. These items are credited to the seller and debited to the buyer

Closing Disclosure (CD). Working with the lender, the closing officer prepares the CD, incorporating all the figures and calculations required for the loan and other closing costs

Ensures that buyers receive an estimate of closing cost on the Loan Estimate form from the lender within 3 days of loan application and a final disclosure of closing costs on the CD at least three business days of closing. This gives the buyer the opportunity to compare the LE with the CD and determine what if any changes may have occurred.

TILA/RESPA Integrated Disclosures, the Dodd Frank Act implemented use of these forms for all federally related mortgage transactions. These forms aren’t required for home equity lines of credit (HELOC’s), seller financing, or reverse mortgages

A new CD triggering a new 3 day waiting period

A new CD triggering a new 3 day waiting period

A charge that a party must pay.

Appraisal and credit report fees, inspection costs, mortgage recording tax, title insurance, loan fees, attorney fees.

Transfer tax, broker commission, attorney fees, recording documents to clear title, existing mortgage satisfaction

A charge that a party has already paid, an amount that will be reimbursed, or an amount that is promised

A charge that a party has already paid, an amount that will be reimbursed, or an amount that is promised

Earnest money, mortgage amount, seller concessions such as a seller paying some of the buyers closing costs

Sale price of the property, prepaid taxes or utilities.

Loan Fees

Appraisal and survey fees

Title Insurance

Legal Fees

Real Estate Commissions

Tax and Insurance Prepayments

Transfer Fees

The property’s assessed value. Governments like property taxes as a revenue base because they’re a stable, reliable revenue source.

A real property sale triggers a transfer tax that’s collected at closing and payable when the deed is recorded.

May be paid by either the buyer or seller, as negotiated between them. The rates vary by location but the usual rate is a percentage of the total sale price or a dollar amount per $1,000 of the sale price

A property sales for $350,000 with a transfer tax rate of .03%. Convert .03% to a decimal (.03/100=.0003). Multiply sales price by rate: $350,000x.0003=$105

A property sells for $225,000 with a transfer tax rate of $1.25 per $1,000 of the sales price

($225,000/1,000) x $1.25=$281.25

Acquisition, Ownership, Sale (Reversion)

When a non US resident foreign person sells real property in the US the FIRPTA requires that buyers withhold 15% of the gross sales price at closing. This withholding is typically handled by the closing agent, but the buyer is responsible for ensuring that the funds are withheld and submitted to the IRS

May cause special title and closing issues that licensees and buyers need to take into consideration. These sales may be referred to as distressed sales, because the property owner is under financial stress to sell

May cause special title and closing issues that licensees and buyers need to take into consideration. These sales may be referred to as distressed sales, because the property owner is under financial stress to sell

A property that is being sold by the lender due to the buyers default. The lender will usually sell the property at auction after proper notice has been provided, and often after allowing the borrower the right to cure the default

If the foreclosure sale doesn’t cover the debt owed by the borrower, the lender may seek a deficiency judgement against the borrower to pay the shortage.

A property that the seller, with the lenders permission, is selling for less than the seller owes against the property

A property that the seller, with the lenders permission, is selling for less than the seller owes against the property

Distressed property sale is an REO. Owners reverts to the lender because of a failed foreclosure sale or because the borrower surrendered ownership of the property to the lender through a deed in lieu of foreclosure

Provides peace of mind by covering system or appliance problems that may develop after a home is purchased

For new construction it generally cover structural issues

Many new construction homes come with this. These may cover workmanship and materials as well as systems and appliances